First National Financial LP

Residential Market Commentary - Downplaying dire doomsayers

  • First National Financial LP

As the Canadian economy starts its slow walk back toward normalcy, or towards whatever the new normal is going to be, Bank of Canada Governor Stephen Poloz is calling out the doomsayers.

With about a week to go before he steps aside on June 2, Poloz says he believes the economy is on track for a healthy recovery from the COVID-19 pandemic, starting in the second quarter of this year.

“Where we are today suggests we’re still tracking to our best-case scenario … not the dire scenario,” Poloz told reporters during a video roundtable last week.

“I do believe the… [pessimism]… I’m hearing is a little too dire.  It’s a little overblown,” he said.

To Poloz’s way of thinking, too many forecasters are fixating on the collapse of the country’s GDP.  But he points out that the underlying “behavioral adjustment” by people, the “downward spiral in confidence” normally associated with recession and depression is not occurring.

The Governor’s theory appears to be born-out, at least modestly, by the latest read on consumer confidence by the Conference Board of Canada.  The figures for May show a 16 point increase in confidence from the record low of 47.5 hit in April. 

The index now sits at 63.7 points.  That is still 60 points below the pre-lockdown reading in February.  But the numbers are also improving as Canadians look ahead.  There is less pessimism about future finances and worries about future employment have also eased.